n Management Today - Michael Jensen : one of finance's five great oracles

Volume 24, Issue 5
  • ISSN : 1027-4324



Shareholders want management to maximise shareholder value which means growing the firm only if management believes the expected rate of return on investment will be equal to or greater than the required rate of return for risk taking. In contrast, management prefers to maximise the size of the firm because their direct remuneration is a function size including head count, assets under management and the size of turnover.

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